MPs debate 'unintended consequences' of proposed letting fees ban

A House of Commons debate on the government's planned ban on letting agent fees has found that a number of MPs are wary of the 'unintended consequences' of a blanket approach.

The debate, which took place on Wednesday September 6 and was organised by Kevin Hollinrake, the MP for Thirsk and Malton and co-founder of long-running estate agent Hunters, saw several MPs refer to the possible consequences for small lettings businesses and low-income or non-UK tenants if the ban comes into force.

Some believe a blanket ban on letting agent fees will simply lead to rising rents – as letting agents pass on their extra costs to landlords, who in turn pass them on to tenants – and could even lead to job losses as agencies have to pare back their operations.

Housing minister Alok Sharma, who only took on the role after June's general election, was in attendance, and confirmed that the government's response to the official consultation on the fees ban – which closed in early June – will be made public in the very near future.

The topic of letting agent fees charged to tenants has long been a thorny one, but it's been given an even higher profile since the government announced in its Autumn Statement plans to ban them outright. The other major political parties in England - Labour and the Liberal Democrats – also hold similar stances when it comes to letting agent fees.

The prospect of a ban has its supporters and detractors in almost equal measure. In an effort to reflect this, Hollinrake opened the debate with a lengthy speech which outlined the possible pros and cons of a fees ban. Those in favour often point to Scotland – where fees have been barred since 2012 – as evidence of how a ban can be successfully implemented without being to the detriment of agents. Since 2012, the number of agents operating north of the border has stayed largely the same and there has been no significant rise in rents.

While the ban posed a challenge for Scottish agents, it also represented an opportunity – with those willing to embrace and make a go of the new landscape prospering as a result.

However, Hollinrake also outlined the unintended consequences that could be caused if the ban was to be implemented in England. Tenants on low incomes, for example, could be impacted negatively if agents opt to only reference prospective tenants who are a 'safe bet'. Agents may take this option if they know they have to shoulder the burden of admin costs and other fees themselves.

After Hollinrake's speech, which also discussed in detail the levels of substandard accommodation in the UK, the proposed cap on holding and security deposits and the issues surrounding enforcement, the floor was given over to other MPs to air their views on the lettings industry and the fees ban in particular. Later, Alok Sharma was invited to speak, with the MP for Reading West calling the debate he'd just witnessed 'good and balanced'.

He explained why he believed capping fees would be largely ineffective, hard for tenants to understand and difficult to enforce. By contrast, he believes a blanket ban would be easy for tenants to understand and enforce themselves.

In addition, Sharma said his department were working with those in the industry to develop a 'How to Let' guide for landlords to go alongside the existing 'How to Rent' guide available to tenants.

Unsurprisingly, David Cox, chief executive of ARLA Propertymark, wasn't too pleased with Sharma's words but was much more encouraged by Hollinrake's. “We welcome this morning's comments from Kevin Hollinrake MP around the unintended consequences of a total ban on letting agent fees,” he said. “It's important that the government understands the value of the services agents carry out for both landlords and tenants when shaping its final legislation.”

“We are therefore disappointed in Alok Sharma's comments today declaring that the government's position remains that all fees will form part of the ban,” Cox added. “As Kevin acknowledges, the ban on fees for referencing checks will cause problems. Agents are required to carry out these checks by law, and they invest both time and resources to ensure this work is carried out properly. The government must now consider exempting referencing checks from the ban as well.”

Despite considerable opposition to (and lobbying against) the proposed ban, there seems very little prospect of the government rowing back on its plans in any significant way. While there may be some sweeteners for letting agents and the trade bodies representing them, the government will also be aware they've made a solid pledge to tenants and will be eager to stick by that as much as they can.

Either way, it's set to be a busy period for letting agents. As we set out in our last blog, September is typically the busiest month for letting agents, so it's vitally important that you have your house in order.

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Montana H

Business Development Director